The Impact of the Energy Transition on the EPC Industry

The rapid and relentless energy transition has affected all power stakeholders, but none, perhaps, with as much complexity as firms engaged in engineering, procurement, and construction (EPC) services.

FREMONT, CA: All electricity stakeholders have been impacted by the quick and constant energy transition, but arguably none more so than companies offering engineering, procurement, and construction (EPC) services. These companies, which often handle contracts with a broad scope, have historically developed into industry standards for the construction of power plants, managing most parts of a project for a developer and forging connections with a wide range of equipment suppliers and subcontractors.

Contracts often involve plant engineering and design, including commencement, implementation, planning and programming, estimating, and valuation. Contracts are always tailored to a project's scope. In terms of procurement, an EPC company will frequently handle the acquisition, setup, operation, and warranty of all equipment, including turbines, generators, and cooling towers. EPC contractors also have to follow timetables during construction, from breaking ground to starting and commissioning, while ensuring quality.

Short construction periods, extremely low levelised costs, the ready availability of manufacturing capacity, and the potential for pollution reduction that solar PV offers should help it remain the preferred option for new development. As the offshore wind sector develops and onshore construction proceeds, encouraged by rising pricing competition, the wind is likewise poised for significant expansion. The lack of ideal locations for large-scale projects may hinder the development of hydropower, and although the nuclear industry is optimistic—construction is planned in new entry countries—policy and investment may ultimately determine how nuclear energy will be developed in the future.

Changes in market profiles and financing strategies have created new entrance points for non-traditional firms into the global market, which is another important trend in the EPC industry. Particularly in the solar PV industry, where there is a fresh wave of consolidation and some reshuffling among the market giants, this trend has come to an end.

The increasing promise of global decarbonisation is being driven by emerging power generation technologies that utilize green hydrogen generated from renewable power sources and advanced battery storage. Hydrogen is garnering more attention as a fuel source due to its potential in power generation, storage, advanced transportation and fuel-cell technology, as well as its application as a feedstock for green chemicals, and processing of blue hydrogen with carbon capture technology. As a result, there is growing interest in utilising or modifying existing infrastructure to incorporate hydrogen as a viable source of energy.

Many EPC companies are heavily focused on increasing bottom lines through integrated efficiency and technological developments that promise to revolutionise engineering and construction in addition to addressing their shifting market prospects. Modularisation and prefabrication are two new cost-cutting strategies that could reduce project timelines, cut expenses on materials and labour, improve the design and quality control, and prevent budget overruns.

The sector has also seen an increase in investments in digital technology, which, for instance, might allow for improved cooperation, more control over the value chain, and data-driven decision-making. Automated parametric design and object libraries may revolutionise the engineering design process, while digital supply networks utilising machine learning and cognitive computing may assist in balancing the supply and demand for building materials and plant equipment.

In the meantime, a variety of technologies, including digital twins, autonomous rovers, and drones, are already being used to simplify building. While these advances may alter how EPC businesses handle operations, design, construction, and partner engagement, they also present a persistent skills gap that may cause a mismatch between the capabilities that people have and what is required.